1. RM Investments Investments- Fall 2005 Marshall Blake Rachel Swartzbaugh

2. Outline Allocations Allocations RM Index vs. S&P 500 RM Index vs. S&P 500 Ratios Ratios Expected Returns and Betas Expected Returns and Betas Correlations Correlations Efficient Portfolio Efficient Portfolio Conclusion Conclusion

3. Diversification 1. Exxon Mobile (XOM) 2. Texas Utilities (TXU) 3. United Health Group (UNH) 4. AstraZeneca plc (AZN) 5. Time Warner (TWTC) 6. AT& T (T) 7. Citigroup ( C) 8. Washington Mutual (WM) 9. Chicago Bridge & Iron (CBI) 10. Jacobs Engineering Group Inc. (JEC) 11. Martha Stewart (MS0) 12. TRX Inc (TRXI)

4. Sector Allocations

5. Asset Allocation

6. Market Trend (Sept-Nov) Note: Index Multiplier was 8E-04

7. Ratios P/EPrice/Book ProfitDividendQtrly Earnings Ratio BetaMarginYieldGrowth Rate XOM11.143.421.0810.67%1.90%74.60% TXU51.5330.20.837.59%1.60%-15.70% UNH26.136.880.907.23%0.02%20.60% AZN20.365.690.5916.16%2.20%1.00% TWTCN/A3.981.77-17.62%0.00%-2.50% T21.801.990.7710.13%5.10%-1.70% C11.072.230.9227.99%3.60%34.60% WM11.411.620.7820.92%4.50%21.80% CBI31.225.011.094.03%0.40%327.00% JEC25.563.341.142.68%0.00%40.40% MSO-11.886.690.94-46.35%0.00%30.00% TRXI-34.854.930.75-10.40%0.00%29.70%

8. Using Historical Data (past 5 years) S&P 500 Portfolio(Oct.)Portfolio(Dec.) E (r ) E (r )2.37%1.30%1.95% Beta1.000.950.95

9. CAPM

10. CAPM Risk Free Rate= 4.02% Return of Market= 2.37% Portfolio’s E ( r)=2.41% What was expected of portfolio is higher than market’s return.

11. Correlations XOMTXUUNHAZNTWTCTCWMCBIJECMSO XOM1 TXU0.241.00 UNH0.06-0.031.00 AZN0.26-0.130.211.00 TWTC0.12-0.07-0.150.001.00 T0.35-0.190.070.480.071.00 C0.28-0.210.060.270.390.321.00 WM0.00 0.010.25-0.100.330.131.00 CBI0.340.150.040.200.190.100.240.221.00 JEC0.320.160.08 0.250.030.150.200.421.00 MSO0.21-0.020.03-0.050.390.090.370.060.160.211

12. Efficient Portfolio

13. RM Investments Conclusion A low-risk portfolio A low-risk portfolio Diversified Diversified Not as efficient as could be Not as efficient as could be Relatively stable compared with S&P 500 Relatively stable compared with S&P 500 Remember RM Investments!